Putting Governance below a Magnifying Glass: A sharper focus.
In 2016, the Decentralized Autonomous Organization (DAO) achieved success in its initial coin offering (ICO) venture, raising $100 million worth of ethers in less than two days, and was dubbed as the “largest crowdfunding project in human history”.
DAO was decentralized and Stateless. This would mean that its general operations does not focus alone on one geographic area. Further, it only had a flat organizational structure. The Organization was governed by smart contracts on Ethereum’s blockchain, and for each project that the Organization eyes to be invested in, the DAO token holders have the choice to choose which project will be chosen through a system of majority voting. This has been the general characteristic of a governance token.
However, a hack that resulted in the theft of $55 million worth of ether by exploiting the vulnerabilities of Ethereum’s code foiled DAO’s ambitions. This split the Ethereum developer community into two (2), between those large investors who demanded a hard fork where a “withdraw” function would be added to its code and refund the investors, and those developers who wanted a soft fork, which would have frozen the funds stolen by the hackers from cashing them in and uphold the “code is law” rule.
The large investor’s demand for a hard fork has been granted and a new blockchain of Ethereum was created. The original blockchain was still continued but is now called Ethereum classic. Today, Ethereum is the second-most-valuable cryptocurrency by market cap and speculation has been arising that it is set to beat Bitcoin in the future. On the other hand, Ethereum Classic sits at the 64th spot.
With this fiasco caused by DAO, regardless of any consequences, issues within cryptocurrencies pertaining to governance has now been brought into a sharp focus.
Why does Cryptocurrency Governance Matter
For investor recourse, clearly defined stakeholder structures are present in Equity markets. Such structures have resulted in governance systems that protect the investor’s interests.
Cryptocurrency governance matters as it serves as protection from rogue executives who could be of harm to any cryptocurrency projects as the community who holds governance token, through their votes, has a say to every decision the project makes.
According to Philipp Hacker, a researcher who has authored a paper on corporate governance systems in cryptocurrencies, says that “At an individual level, real monetary value is at stake, which in turn gives rise to investor and payment protection concerns”. He also added that investors of cryptocurrency have rights similar to those shareholders of a company because protocol changes in blockchain directly affects these investors. Thus, with the establishment of voting systems, participation of investors for the changes to be incurred in the blockchain can help ease the shareholder’s concerns for the future of the crypto project in general, and the shareholder’s interest over its investments.
According to Hacker, “Giving users a voice in the guise of voting rights constrains the action space of core developers with respect to actions that affect the community but for which they are not sufficiently accountable at the moment.”
PRV and its upcoming Governance Token
With the upcoming of the highly anticipated Great Migration of PRV, one of its added features is the introduction of a Governance Token, the PRVG. Once you are a hodler of PRV prior to the launch of the Great Migration, at a set ratio, you will be given both PRV2 and PRVG.
This is not present in our current ecosystem. But with the Great Migration right around the corner, PRVG will be used not just for voting privileges of investors in the near future, but it will also be used as the staking token for the PrivacyCards which will soon be released to the public.
One of the most exciting things about our Governance token is that, not only that it will soon be used for voting privileges for PrivacySwap’s future endeavors along the way, PRVG hodlers will also be able to own a portion of our PrivacySwap farms where, depending on the amount one holds, could be able to earn a portion of the transfer taxes, deposit fees, and the like, generated throughout the farms.
PRVG is not in our original roadmap for PrivacySwap. But along the way, we have realized that the community should have the say in the development and improvement of PRV 2.0. PRVG, as our upcoming governance token, will pave the way for a brighter future that we aspire for our beloved PRVArmy.