Original Author: Ben Giove
Original compilation: AididiaoJP, Foresight News
Original Author: Ben Giove
Original compilation: AididiaoJP, Foresight News
Decentralized Autonomous Organizations (DAOs) have struggled to grow in a bear market and continue to face many challenges.
There are still significant limitations in DAO governance, a recent example being the proposal to shut down Tride DAO initiated by Fei Labs, one of the entities behind the development of the Fei Protocol protocol on August 19th.
It is expected that many DAOs will fail like other startups, but the proposal to shut down Tribe DAO has caused significant controversy in the community. This article reviews the sequence of events that brought Tribe DAO to this point, and its broader implications for DAOs as a whole.
1. Merger of Fei Protocol and Rari
Tribe DAO was created in December 2021 through the merger of Fei Protocol, the issuer of the dollar-pegged FEI stablecoin, and Rari Capital, the entity behind Fuse, which aims to enable users to create independent money markets.
This merger unites the two emerging fields of DeFi lending and stablecoins. The market is so confident that even as it prepares to close, FEI still has a circulating supply of $735 million, while Fuse has a TVL of over $1.1 billion.
2. Fuse Vulnerabilities and Repayment Voting
In April 2022, Fuse was attacked and lost nearly $80 million, resulting in bad debts on several of the largest Fuse pools and lenders being unable to withdraw assets. The victims of this attack were not only individual users, but also some DAOs, among them Frax, Olympus and Babylon Finance.
Tribe DAO initially intends to compensate victims with protocol control value PCV (PCV is an asset used to support FEI, controlled by TRIBE holders). 75% voted in favor of repaying victims in full, initial snapshot vote passed.
However, before the final on-chain governance vote, the situation changed. Fei Labs objected to the repayment, and TRIBE holders chose not to repay affected depositors.
3. Discontinuation Proposal
On August 19th, Fei Labs published a proposal to shut down the Tribe DAO. Under the proposal, FEI holders would be able to exchange their stablecoins for DAI at a 1:1 ratio, and victims would receive $57 million in TRIBE compensation ($11.3 million at current prices), while the DAO's remaining Assets will be distributed proportionally to TRIBE holders.
The proposal was met with strong opposition from Tribe DAO stakeholders, as victims were not fully compensated for their losses. For example, under current proposals, DAOs such as Frax and Olympus would only receive 2% and 3% of their $12.3 million and $8.9 million asset losses, respectively.
The controversy was further exacerbated by calculations by community members that even after redeeming FEI and fully compensating depositors, Tribe DAO had enough assets to fully compensate all parties affected by the hack, while still being able to return certain tokens to token holders. value, the TRIBE token value will be $0.16.
It is worth noting that while the proposal could be amended before passing governance, currently TRIBE holders may have a higher liquidation priority than victims of exploitation.
In addition to "D" in DAO, "A" is equally important
The impact of the Tribe DAO incident on the industry is huge, and it may set a precedent for how to deal with this type of issue. There is still a long way to go in terms of compensation for victims as creditors.
Reflecting on the future, DAOs should not leave these issues to the whims of post-event governance, but should set clear event governance procedures in the agreement. While much of the industry’s focus has been on the “D” and “O” of DAOs, this case shows that “A” automation is just as important.
summary
Given how immature DAOs are, we are probably a long way from this state of automation. Mere promises to create more automated repayment mechanisms in the future will not help solve the problems the community faces today, but as usual, the industry will emerge more resilient and autonomous as it overcomes these challenges.
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