How to participate in the governance of decentralized projects? Do these three things first

Source: Lightning HSL, Author: Lightning Huang Shiliang

The concept of decentralized organization Dao is particularly important in the cryptocurrency world. This article would like to discuss how to participate in the governance of decentralized projects.

Let’s first define what governance is.

A product or protocol needs to be upgraded iteratively, such as adding new features and conducting marketing promotions. We call all these actions that make the product or protocol more valuable governance.

Updates to cryptocurrency products need to be divided into two categories. One category involves compatibility, or involves modifications to the consensus layer; the second category does not involve modifications to the consensus layer.

Whether Bitcoin should expand is a major governance issue, which involves the modification of the consensus layer. If no consensus is reached, it will cause division.

But this article does not want to discuss governance at the consensus level. This article wants to discuss projects like MakerDao, Compound, and Uniswap, which have voting functions to determine how the project evolves.

Decentralized projects, such as Uniswap, although there are core developers, the update of the project still depends largely on community governance. The governance process can generally be divided into three stages: discovering needs, realizing needs, and then promoting needs.

Governance tokens will play a role in the entire process. For example, if someone discovers a need, they can initiate a vote and ask developers to develop it.

Developers develop a feature and in order to activate it on the chain, they can also activate it through voting.

We often see similar governance processes in Uniswap and Compound.

How can we participate in the governance of a project?

The first question to answer is, why should you participate in the governance of a project? This project is probably not yours, and you are not even the biggest beneficiary.

There is commercial value in being able to participate in governance.

The most direct one is that projects generally have financial rewards for those who contribute to the project, and governance is eligible for these rewards. But this is very uncertain.

Governance is a kind of operation and maintenance capability, which can have a great value in terms of cash flow. You can influence the development direction of the protocol, which undoubtedly has a huge arbitrage space. At the very least, it is of great help to investment.

A16Z, a large investment institution in the cryptocurrency circle, now holds a large number of governance token votes for leading projects such as Compound.

Governance ability also represents one’s status in the industry, which is a value in itself.

If you want to participate in governance, I think you should do the following things.

The first is to collect existing information.

In order to be eligible to participate in governance, it is best to read every detail of the project's official website and be able to read the code. Understand the project's value, technical details, and community status.

At least you should complete reading the official website, and don't miss all the information in important project communities, such as discord, forums, twitter, and reddit forums.

The second is to collect potential governance directions, or to collect project requirements to see what can be improved in the project. Evaluate the requirements, study the feasibility of realizing the requirements, and study the realization value of the requirements.

This process requires organizing a lot of communication, including communicating with community users, communicating with developers, outputting some text and even code work.

The third is to master some core resources related to the project.

For example, A16Z is able to participate in the governance of projects on a large scale. The main reason is that they are a large institution in the investment circle, have influence, capital, and control the voting base of various projects.

Ordinary retail investors, people and organizations without core values ​​basically have no chance to participate in governance.

If you control the core resources of a project, you are generally able to influence the development of the project. For example, if you are a large investor in an exchange, the exchange will certainly consider your opinions.

For a project, the common key resources are: professional knowledge, such as what Vitalik said, which definitely has a governance effect; influence, such as what CZ and AC said, which is also governance; capital, such as A16Z's opinions, which the project party will listen to.

There are also some projects with unique resources, such as Uniswap. If you make a financial contract (similar to Harvest) and control a large number of LP tokens, you will have a say in the development of Uniswap projects. For example, if you control a large number of cTokens, the project party of the loan agreement will also listen to your comments.

When you have completed the above three tasks, you should be participating in the governance of the project. As for writing code, promoting, and participating in voting, these are all implementation details.