The majority of the western world is convinced beyond reason that democracy is the supreme form of governance. It is a concept that is instilled in elementary schools across the United States. The concept is so fundamental to social order in America that there is little room for questioning if another form of governance may in fact be better. It is taught that democracy is the tool of freedom to liberate those under oppression. The phrase “freedom isn’t free” is often used to justify the liberation of others from minority rule at the expense of many lives. It is not hard to see however that this expression can easily be used as a tool for mass manipulation to justify conquering others.
As the United States reaches nearly two and a half centuries of established democracy, what can be observed? The nation now operates under a plethora of laws that stretch far from the constitution’s original intention, often contradicting one another and diverging from an efficient governance structure. Laws which are a result of politicians following their own best interest of staying politicians. A nation of laws is hardly a proper definition of freedom. The old saying that “the road to hell is paved with good intentions” is fitting.
What are the mechanisms behind this natural progression of democratic oppression? If we consider that systemic efficiency is logic driven and humans are primarily emotion driven, we can begin to see how a governance model of majority rule leads to an overabundance of inefficient rule.
Now we get to digital assets and decentralized finance governance models. Satoshi Nakamoto and company created Bitcoin in response to the current political nature of currency. The globe’s debt-based financial system is hardly democratic. Nonetheless, the emotional driving force of greed behind the world’s financial system allows for the bank centric, bond issuing system that expends national currency scarcity and value. The emotional greed is not necessarily financially motivated so much as it is politically motivated to keep those in control of the system remaining in control. Bitcoin aims to mitigate the emotional political factor that inevitably results from human governance.
Logic is the dominant driver of systemic efficiency in a dualistic reality of logic and emotion. As more and more DeFi protocols issue governance tokens to incentivize users to participate, the governance tokens will inevitably themselves be the downfall of their own protocols. It is much more reasonable to assume that most governance token holders will eventually vote in a way that benefit their own interests over the long-term health of the protocol. It is much more difficult for an individual to parent themselves rather than to be parented. This is not an article advocating for the advantage of centralized finance over decentralized finance, but merely highlighting the dangers that arise from protocols using governance tokens to dictate the future of the protocol. Examples of this are already beginning to show up in the DeFi space such as the additional issuance of 6,666 YFI tokens by a majority vote from token holders in efforts to better compensate key project developers. Here can be seen the classic currency devaluation dilemma reoccurring in the DeFi space in one of the few fair launch token distribution DeFi protocols.
The solution to this can only be a truly decentralized protocol. Bitcoin is the closest example in existence to addressing this dilemma, however there is no decentralized yield earning mechanism to capitalize on the capital/energy efficiency of Bitcoin within the Bitcoin ecosystem. Decentralized finance is a beautiful steppingstone in the process of moving away from the overreaching grips of the current centralized financial system, but the democratic nature of governance tokens will inevitably lead to the same fundamental issue of acting toward minority interests. Money cannot be political in nature. It is a medium of exchange, not a tool of control.
