Bankless controversy forces founders to burn tokens and separate from DAO

November 27, 2023 Coin Telegraph

The co-founders of crypto media Bankless are seeking to separate their brand from BanklessDAO some two years after the launch of DAO.

Amid the ongoing controversy around cryptocurrency media Bankless and the associated decentralized autonomous organization (DAO), BanklessDAO, the founders of Bankless have suggested separating the brand from the DAO.

Bankless co-founders David Hoffman and Ryan Sean Adams plan to submit a governance proposal to BanklessDAO to separate the two entities. The co-founders took to X (formerly Twitter) on Nov. 26 to announce that they also plan to burn all of their BanklessDAO (BANK) tokens on the back of this proposal.

Hello CT

To lead with the obvious, we could be better in accepting criticism of @BanklessHQ.

I hold Bankless very dear, and I've got an innate reflex to protect it when I see it being unfairly attacked.

This clouds my ability to hear what CT is trying to tell me,… pic.twitter.com/7L5ufQ1bAu
— DavidHoffman.eth (@TrustlessState) November 26, 2023

Hoffman and Adams’ decision to separate Bankless from BanklessDAO came in response to community criticism of BanklessDAO’s application for a grant from Arbitrum. Filed on Nov. 20, the application asked for 1.82 million Arbitrum (ARB) tokens from Arbitrum, a layer 2 scaling project for the Ethereum blockchain. The amount is worth around $1.8 million at the time of writing, according to data from CoinGecko.

“The concern is that BanklessDAO would not be able to make such ambitious proposals without leveraging the weight of the Bankless brand, which they did not produce, is not theirs, and ought not to benefit from,” Hoffman wrote.

The BanklessDAO community was quick to criticize the initiative, with many DAO members pointing out that the proposal requested almost two million ARB for writing content without providing detailed information about how the money would be spent. In response, BanklessDAO committed to revising the proposal to cut the one-year grant to three months and providing clear KPIs and milestones.

*BanklessDAO’s education and onboarding campaign for Arbitrum. Source: Arbitrum Foundation*

The argument between the proposal backers and opponents escalated rapidly on social media. Some commentators like pseudonymous Delegate Cash CEO Foobar accused Bankless founders of “legitimacy grifting” by pretending that BanklessDAO was completely unrelated to Bankless.

Some Bitcoin (BTC) enthusiasts like Pledditor also criticized Bankless founders for claiming “they aren’t grifters,” referring to Hoffman and Adams promoting projects like Nexo. “They later clarified that they were paid 31k to shill Nexo, not 250k,” Pledditor wrote.

Bankless co-founder Adams addressed the criticism, stressing that calling creators grifters for running ads is essentially trying to consume products for free. He also stated that paid subscribers have always funded the mission of Bankless.

Plz understand - when you call creators grifters for running ads - yet aren’t willing to pay for their products you’re asking them to work for free.

Is that fair?

How we do it: if you don’t like ads you can pay $15 monthly for no ads.

If you want crypto media then support it.
— RYAN SΞAN ADAMS - rsa.eth (@RyanSAdams) November 26, 2023

Founded in 2019, Bankless is a crypto media company that promotes the adoption and awareness of bankless money systems. In May 2021, Bankless launched Bankless DAO, a decentralized community to coordinate and promote bankless media, and launched the BANK token.

In April 2023, Bankless founders announced it was raising a $35 million venture capital fund to invest in seed-stage Web3 companies.

Magazine: Are DAOs overhyped and unworkable? Lessons from the front lines

a16z suggests Machiavelli to fix decentralized governance

September 21, 2023 Coin Telegraph

Coin Telegraph

In a blog post on Sept 21, a16z's Miles Jennings discusses how decentralized autonomous organizations (DAOs) can avoid power centralization by applying Machiavelli's principles.

Principles written almost 500 years ago by Niccolò Machiavelli — author of the controversial political work "The Prince" — are the path to solving decentralized governance issues on autonomous organizations, according to a blog post by venture capital firm Andreessen Horowitz (a16z).

The piece is signed by a16z's general counsel and head of decentralization Miles Jennings, who believes that "applying Machiavellian principles to decentralized governance in web3 can address current shortcomings." According to Jennings, Machiavelli’s philosophy has a pragmatic understanding of struggles of social power, which are similar to those experienced by crypto protocols and their decentralized autonomous organizations (DAOs).

Considered the father of modern political theory, Niccolò Machiavelli was an Italian political philosopher and diplomat. In "The Prince," he presents fundamental concepts about social power, and argues that the ends — particularly the stability of the state — can justify the means, even if those means are ruthless.

Jennings uses Machiavelli's work to discuss how to avoid power centralization. The first concept discussed in the piece relates to the idea that organizations tend towards autocratic leadership, therefore demanding DAOs to limit governance by shifting many decisions to the client or third-party layer. According to Jennings:

"[governance minimization] could substantially limit the number of decisions required to pass through the decentralized governance process — significantly lowering the governance burden for the protocol."

Further, the second principle notes that it's critical for DAOs to counterbalance power among leadership classes, leaving emerging leaders exposed to open opposition. He suggests DAOs operate with a bicameral governance layer, just as in the U.S. Congress, which is divided into the House of Representatives and the Senate.

Using non-token based voting systems, like proof of personhood, does not help DAOs combat autocracy, suggests Jennings. "While proof of personhood could mitigate a DAO’s vulnerability to attack, it would be unlikely to eliminate autocracy."

*Example of governance system based on delegate council. Source: a16zcrypto.*

The third principle says DAOs should not only have constant opposition, but allow new leaders to force their way into the leadership class by creating a churn, preventing a static power balance. "According to the Machiavellians this churn must be forced, as the leadership class will always push against it in order to preserve their position and privilege."

Jennings further notes that community members are often limited in their ability to acquire power in token-based voting systems, given the financial barriers to obtaining such power.

Finally, in the fourth principle, Jennings suggests DAOs to adopt lockup mechanisms for holders participating in stakeholder councils. "If large groups of people are indeed inherently unable to properly hold their leaders accountable (as the Machiavellians predict), DAOs should seek to implement measures that enhance greater accountability throughout their ecosystems," reads the document. Jennings notes as a conclusion:

"Web3 should triumph over web2 through decentralization, which reduces censorship and promotes liberty, which in turn enables opposition to power, and therefore drives greater progress. By incentivizing competition, empowering rivals, and utilizing non-token based voting, DAOs can help accelerate this cycle."

Magazine: Are DAOs overhyped and unworkable? Lessons from the front lines

Aave DAO opens voting on proposals to reduce CRV exposure

August 10, 2023 Coin Telegraph

Aave

Aave token holders are voting on three proposals that could reshape the protocol's exposure to Curve DAO token.

The Aave community is seeking to reduce its protocol exposure to the Curve DAO (CRV) token, with two proposals open for voting on Aug. 10. The move comes in an attempt to limit the risk posed to the lending protocol by the large borrowing position held by Curve Finance founder Michael Egorov.

CRV is the native token of the decentralized finance protocol Curve Finance. Egorov deposited over 30% of CRV's total market capitalization as collateral to take out nearly $60 million in loans on Aave V2. However, Curve's hack on July 30 impacted its token price, making Egorov's position vulnerable to liquidation.

Until Aug. 12, Aave token holders can vote on two proposals. One seeks to reduce the Liquidation Threshold (LT) by 6% for CRV on Aave V2, which could result in user accounts becoming eligible for liquidation upon approval. The second disables borrowing of CRV on Ethereum and Polygon V3, thus disabling the ability to short CRV via the Aave protocol.

*Proposal to reduce Liquidation Threshold for CRV on Aave V2 Ethereum. Source: Aave.*

At the time of writing, over 571,000 votes have been cast, with 100% of holders supporting limiting Aave's exposure to CRV.

Amid fears of liquidation surrounding Egorov’s loans, the Aave community is also voting on a third proposal ending on Aug. 11. In the proposal, Aave Chan founder Marc Zeller calls for Aave Treasury to buy $2 million worth of CRV tokens from Curve, claiming it would signal that DeFi players support the health of the ecosystem. At the time of writing, 62.91% of voters support the purchase, while 37.09% are against it.

Curve's attack sparked fears of cascading effects across the DeFi ecosystem. Behind the hack was found a vulnerability on three versions of Vyper — a common programming language across DeFi protocols. The vulnerability triggered white hat and black hat hackers to battle on-chain, fighting over exploit attempts and money recoveries. A portion of the funds had been returned by the attacker. Curve Finance is offering a bug bounty to anyone able to identify the thief.

Magazine: How smart people invest in dumb memecoins — 3-point plan for success

Solana’s Parrot Protocol submits proposal to go tokenless, investors risk face -89% returns

July 22, 2023 Coin Telegraph

Coin Telegraph

The proposal calls for the redemption of PRT tokens for liquid treasury value, and the transition to a no-token protocol. Community members referred to the move as a "financial crime".

A recent proposal from Parrot Protocol's team, a Solana-based liquidity network, has sparked controversy among its community members. The proposal, up for vote until July 27, calls for the redemption of its PRT tokens for liquid treasury value, and the transition to a no-token protocol.

Based on the proposal, the PRT redemption price was established at $0.0045 per token. According to data from CryptoRank, the protocol raised over $89 million since its inception in 2021, with a current return on investment (ROI) of -89% for investors in its Initial DEX Offering (IDO) and initial exchange offering (IEO). Having a negative ROI indicates that investors have lost money on their investment.

Today in governance was a mistake news: @gopartyparrot team takes their $72m remaining in ICO funds and attempts to split it $12m to the token holders, $60m to the team.

Oh they also early unlocked their tokens and will be voting it through regardless of what anybody else says pic.twitter.com/vmhDXJochQ
— Spreek (@spreekaway) July 21, 2023

The protocol's plan does not explain the reasons behind the move, only mentioning that "many PRT holders would like to redeem their PRT tokens for their treasury value." The proposal also follows changes in Parrot's tokenomics from November 2022, when the protocol shortened its token locking period from 12 months to 7 days, claiming it would "create more flexibility for stakeholders to enter or exit their positions."

Comments from community members indicate that 81% of tokens are controlled by the team. However, Parrot's team has refuted these claims by stating on Twitter that treasury tokens are never touched or used for governance purposes. A breakdown provided by CryptoRank indicates that 35% of tokens were distributed as Protocol Incentives, 20% as Team & Angels, 10% as public sales, 20% as Seed rounds, and 15% as Others.

*Parrot Protocol Token Sale. Source: CryptoRank.*

Additionally, the proposal does not clarify what would be the fate of unclaimed funds after the 8-week redemption period, with community members suggesting the funds could be cashed out by insiders.

"The community has already explained in painstaking detail why we're not interested in this. The pro-rata value is an extreme lowball and fails to account for many of the team's misuses of the treasury without the community's consent. The team also prematurely unlocked the team and VCs' vesting tokens, so they are the majority token holders, making this vote meaningless and a total farce," wrote one community member on the proposal discussion.

Magazine: Tornado Cash 2.0 — The race to build safe and legal coin mixers

Tornado Cash attacker to potentially give back governance control, proposal reveals

May 22, 2023 Coin Telegraph

Coin Telegraph

A few hours into the hack, to everyone’s surprise, the attacker surprisingly reached out to the Tornado Cash community with a new proposal to supposedly give back governance control.

An attacker who sparked community-wide panic by hijacking the Tornado Cash governance is now proposing to undo their hack — and while not everyone feels the hacker can be trusted, they apparently have little choice in the matter.

On May 21, the passage of a malicious proposal allowed the attacker to gain complete control over Tornado Cash’s governance. With total control over the governance of the decentralized crypto mixer, the attacker was in a position to inflict massive losses, considering they could withdraw all of the locked votes, drain all of the tokens in the governance contract and brick the router.

While the story unfolded, community member Tornadosaurus-Hex or Mr. Tornadosaurus Hex, took proactive steps to minimize the potential damages by publishing a subsequent proposal requesting all members to withdraw all funds locked in governance, as shown below.

*A Tornado Cash community member’s proposal for gaining control from the attacker. Source: Tornado Cash forums*

However, Mr. Tornadosaurus Hex (Hex) was uncertain about the effectiveness of the new proposal considering the attacker’s grip over the mixer’s governance. A few hours into the hack, to everyone’s surprise, the attacker surprisingly reached out to the Tornado Cash community with a new proposal, hinting at their intent to give back the governance control.

*The Tornado Cash attacker’s proposal. Source:* *Tornado Cash forums*

As shown above, Hex communicated the attacker’s plan to the community, stating that:

“The attacker posted a new proposal to restore the state of Governance. I think that there is a good chance he’s going to execute it.”

Hex further pointed out that while the community has no other option other than complying with the attacker’s chosen method of giving back the governance control, his due diligence with regard to verifying storage layouts checks out.

*Mr. Tornadosaurus Hex confirmed the slot matching.* *Source:* *Tornado Cash forums*

While many community members showed optimism toward the attacker’s supposed change of heart, others speculate it was a move to pump the TORN token’s price before cashing out.

On the bright side, the crypto ecosystem has witnessed a sharp decline in the overall hacks in the first quarter of 2023.

*Graph showing hacks and exploits from Q1 2022 - Q1 2023. Source: TRM Labs*

However, history suggests that crypto users shouldn’t get complacent as 2022 witnessed a spike in crypto hacks soon after recording a slow phase.

Magazine: ‘Moral responsibility’: Can blockchain really improve trust in AI?

BitDAO proposes to replace BIT token in branding revamp

May 12, 2023 Coin Telegraph

Coin Telegraph

After community approval, BIT holders will undergo a token-conversion process for the new Mantle token. Governance and treasury management will remain unchanged.

A proposal seeking to apply a "One Brand, One token" principle has been pushed to a vote on BitDAO's Snapshot and calls for substituting BitDAO's token (BIT) under a new governance token. Snapshot serves as an off-chain governance voting platform for decentralized autonomous organizations (DAOs) and other blockchain projects.

According to proposal BIP-21, the BitDAO ecosystem — governance (BitDAO) and product (Mantle) — will be unified as Mantle. Governance processes and treasury management will remain unchanged, but after community approval, BIT holders will undergo a token-conversion process for the new Mantle token.

The move comes ahead of the mainnet launch of Mantle, a scaling layer-2 protocol built on Ethereum. The mainnet launch is expected in the coming weeks. BitDAO is backed by crypto exchange Bybit, along with Pantera Capital, Dragonfly and venture capitalist Peter Thiel.

Token conversions may introduce a fixed exchange rate for all users, preserving all governance rights and other interests, according to the BIP-21 description. A gradual conversion process will be available on different channels, and holders will have a timeline for converting tokens.

*BIP-21 proposal by BitDAO. Source: Mantle on Twitter*

Token-conversion rules and ratios shall apply to all tokenholders equally, and holders are not required to take any action in advance, says the proposal. Details on token-conversion plans will be discussed if BIP-21 is approved.

BitDAO claims the "brand optimization" aims to reduce the complexity around the BIT ecosystem. "There is complexity as to whether $BIT should be valued for its governance component or product component or some combination," claims the proposal.

Along with its token replacement, BitDAO seeks to improve its tokenomics by accelerating contributions and remaining vesting schedules from its launch in 2021, meaning no outstanding vesting schedules will be inherited from the original BitDAO launch.

Voting on the proposal is open until May 19. At the time of writing, the proposal has received 100% support from over 25 million BIT votes. On BitDAO's governance forum, community members raised their voices to support the branding unification.

"[M]erging the brands before the Mantle mainnet release is a strategic move that will help create a unified identity for the ecosystem. This will ensure that users, developers, and token holders can associate the token and its value proposition with the Mantle brand," wrote a DAO member.

Magazine: The legal dangers of getting involved with DAOs

BlockGPT launches ‘chat to earn’ ecosystem for training AI

May 11, 2023 Coin Telegraph

A new Web3 initiative aims to build a ChatGPT-style artificial intelligence system on the blockchain.

BlockGPT, a recently-launched Web3 company, announced the launch of its ‘chat to earn’ artificial intelligence (AI) service and related blockchain ecosystem on May 11.

According to the company, BlockGPT aims to create a decentralized, token-governed chatbot on the blockchain with similar functionality to OpenAI’s ChatGPT.

$BGPT is not the only token in #BlockGPT ecosystem. We're excited to introduce $AIBGPT, a free airdrop token belonging to the BlockGPT community. It has a total supply of 10,000,000,000,000.

But act fastit's first come, first serve!

Threads#AI #Airdrop #memecoins #BNB pic.twitter.com/j03IeT0gVY
— BlockGPT BSC (@BlockGPT_BSC) May 10, 2023

The AI model's launch comes alongside the offering of two tokens, a governance token called BGPT and a meme token called AIBGPT. Both are reportedly built on PancakeSwap, a decentralized exchange that allows users to trade BEP-20 tokens.

BlockGPT is offering a “chat to earn” reward system alongside the tokens. According to the press release, this will allow users to earn nonfungible token (NFT) and token prizes for engaging in chat sessions with the AI model.

A white paper located on the BlockGPT website states that the company is employing more than six generative pre-trained transformer (GPT) models on the platform and that they were trained using a proprietary dataset.

The paper doesn’t give any information on the size of the corpus, the number of parameters used to train the model, or any other details relevant to the AI’s technical specifications, but it does claim that it was specifically designed to answer blockchain-related queries:

“BlockGPT was trained using a vast dataset of Blockchain-related information, resources, and research papers. [...] As a result, BlockGPT is now capable of comprehending and answering an extensive range of questions related to Blockchain technology.”

The paper also states that the BlockGPT model will allow developers to enable “on-chain AI inference through its essential AI Inference Engine” and that it utilized the Synapse engine to provide “a reliable framework for building DApps and smart contracts that leverage AI technology.”

BlockGPT’s launch comes amid a flurry of activity in both the AI and token spaces. Memecoins such as Dogecoin (DOGE) and Pepe (PEPE) have made headlines recently and the competition between OpenAI’s ChatGPT, Google’s Bard, and a plethora of other chatbot offerings has dominated technology news for months.

Arbitrum proposal to return 700M ARB fails, whale calls it a “power play”

April 15, 2023 Coin Telegraph

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Arbitrum

The AIP-1.05 was defeated by 118 million votes. The proposal was introduced after the Arbitrum Foundation transferred funds without community approval.

A controversial proposal seeking the return of 700 million ARB governance tokens to Arbitrum's DAO Treasury was rejected by a massive number of votes on April 15. The Improvement Proposal AIP-1.05 was introduced after the Arbitrum Foundation transferred funds without community approval in March.

The AIP-1.05 was defeated by 118 million votes, representing 84% of the total votes received, while 21 million ARB tokens voted for the proposal, nearly 14.5% of the total. Around 2 million ARB tokens abstained. The proposal asked the Foundation to return the tokens as a “symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation.”

*Screenshot - AIP-1.05: Arbitrum Improvement Proposal Framework. Source: Arbitrum DAO.*

On the governance forum, a whale with 4.8 million ARB tokens said the proposal "seems to only serve as a power play" that would add an "unnecessary step" and delay the Foundation's ability "to support the growth of the Arbitrum ecosystem."

Another whale voting against the proposal with 18 million ARB tokens stated that balance is necessary to promote decentralization and progress in the ecosystem:

"There is a balance that we need to try to accomplish between advocating for decentralization and preventing progress in the ecosystem. I believe that decentralization on its ideal form is nowhere to be seen in this industry yet."

Arbitrum's community and its Foundation are engaged in a dispute over the Foundation's governance proposal AIP-1 — which called for investment of nearly $1 billion worth of ARB tokens to fund its operations. After facing community backlash, the Foundation later said that AIP-1 was a ratification, not a proposal. It added that some of the tokens were already sold for stablecoins.

The AIP-1 proposal was Arbitrum's first attempt at governance after its tokens airdrop in early March. The Foundation has already released a new set of improvement proposals aimed at reestablishing dialogue with the community.

Magazine: The legal dangers of getting involved with DAOs

Uniswap funds DAO incentive improvement project

April 11, 2023 Coin Telegraph

Coin Governance System

The project will provide at least three proposals for Uniswap incentive mechanisms by June.

Financial modeling platform Gauntlet has been awarded a grant from Uniswap Foundation to improve DAO incentive mechanisms, according to an announcement from Gauntlet.

Very excited to announce our engagement with @gauntletnetwork and their new Applied Research Group!

Gauntlet will be focused on designing and specifying incentive programs to benefit the Uniswap Protocol. https://t.co/RjzV02hFhf
— Uniswap Foundation (@UniswapFND) April 11, 2023

Gauntlet describes itself as a “crypto-native financial risk management solutions provider.” It uses economic models to optimize fees and rewards for decentralized finance (DeFi) protocols, according to the announcement. The company is creating a new division, Gauntlet Applied Research, which will specifically focus on problems related to the growing decentralized autonomous organization (DAO) ecosystem.

In its announcement, Gauntlet said that it will provide three pieces of research to UniswapDAO. The first will be a quantitative framework that the DAO can use to evaluate the success or failure of the Uniswap protocol. The second will be an analysis of trader and liquidity provider behavior, and the third will be at least three proposals for incentive mechanisms to allow the DAO to achieve its goals.

Gauntlet said that it expects all three of these deliverables to be completed by June 2023.

Devin Walsh, executive director of Uniswap Foundation, expressed hope that Gauntlet’s research will help to improve not only the Uniswap protocol, but also the crypto ecosystem as a whole, stating:

One of our goals at the Uniswap Foundation is to build long-term relationships with the most talented and values-aligned teams in the space, and work with them on the most complex and interesting questions facing the Uniswap Protocol.

DAOs have become a basic feature of the crypto economy over the past few years, with DAO analytics provider DeepDAO currently listing over 2,300 existing DAOs. Most DAOs are governed by token holders, who are allowed to vote directly on the blockchain to support or reject proposals for changes to a protocol.

However, token-based DAO governance has also been criticized by some industry experts, including Ethereum Founder Vitalik Buterin, who stated that this system could lead to “vote-buying” and “outright attacks.”

Over the past few months, some DAOs have attempted to provide better incentive mechanisms in the hopes of preventing vote-buying attacks. For example, MakerDAO passed a constitution on March 27 to formalize governance processes and provide checks and balances to prevent concentration of power.

Community wants Arbitrum Foundation to return 700M ARB to DAO Treasury

April 9, 2023 Coin Telegraph

Arbitrum

A new proposal asks the Arbitrum Foundation to return 700 million ARB tokens after community backlash. Voting ends on April 14.

As per the proposal, the Foundation should proceed with its budget plan only after returning the tokens. "This is a symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation," said a community member.

Voting will end on April 14. At the time of writing, 55% of voters supported the proposal, 42% opposed it, and 2% abstained.

*Screenshot: AIP 1.05: Return 700M ARB to the DAO Treasury. Source: Arbitrum's DAO.*

The dispute between Arbitrum's Foundation and its community started at the end of March, following the Foundation's first governance proposal (AIP-1) which called for funding its operations with 750 million ARB tokens — worth nearly $1 billion.

Following backlash from community members, the Foundation said in a forum post on April 2 that AIP-1 was a ratification, not a proposal. It added that some of the tokens were already sold for stablecoins. At that time, the Foundation noted that its symbolic first governance attempt failed due to communication problems and decisions that were “clearly not articulated correctly.”

A few days later, the Arbitrum Foundation released a set of new improvement proposals aimed at restoring community dialogue. The new proposals include AIP-1.1, which covers a smart contract lockup schedule, spending, budget and transparency. The other, AIP-1.2, tackles amendments to current founding documents and lowers the proposal threshold from 5 million ARB tokens to 1 million ARB “to make governance more accessible.”

The efforts, however, did not resolve the issues with ARB holders. "The Foundation has unilaterally been allocated $750M tokens from the DAO that was not approved by the governance token holders. Any funds must be returned until it has been properly allocated by the DAO and the DAO only," claims the proposal seeking the return of the funds.

The Arbitrum community initiated a new proposal requesting the Arbitrum Foundation to return 700 million ARB tokens to its DAO Treasury. The move comes after the Arbitrum Foundation transferred the funds without receiving the community's approval in March.

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