A16z Discusses Its Novel Approach to Cryptocurrency Governance

Following a couple of contentious votes in the Uniswap exchange's governance forums, venture capital firm Andreessen Horowitz (a16z) said Thursday that it would "open source" its decentralized finance (DeFi) delegation processes in a blog post.

The article, titled "Open Sourcing our Token Delegate Program," explains how a16z picks the people and organizations to whom it delegate its significant voting clout.

Given the size of the DeFi ecosystem, which now rivals mid-sized American banks in total value locked (TVL) at $146 billion, and the significant governance token reserves controlled by a16z, this effort to increase transparency sheds light on policies that have the power to shape an emerging financial vertical.

The a16z article includes a copy of the 1,500-word legal agreement designed to guarantee delegate independence, as well as a complete analysis of existing a16z delegates and their voting power, as well as an explanation of the organization's conceptual approach to delegation.

In an interview with CoinDesk, a16z partner Jeff Amico stated that a new four-person team would be in charge of DAO voting and delegation. Alex Kroeger, a former 0x engineer, revealed last week that he will be joining the team as well:

The a16z Protocol team will be the first-ever third-party professional protocol politicians, with a sphere of influence that will place a16z among the most influential voices in DAO governance.

The Protocol team will pick the organizations who will get "far over half" of a16z's voting power, as well as how to vote with the remaining proportion, eventually controlling a pool of tokens that may influence governance initiatives on their own.

Democracy in the DAO

After a couple of contentious votes in Uniswap's DAO governance system, the initiative to "open source" delegate processes has been launched.

A proposal to establish a $20 million DeFi Education Fund to participate in political action was approved in June. The plan, which was prepared by a16z delegate Harvard Law Blockchain and Fintech Initiative and supported by a16z, was widely panned for its lack of transparency and monitoring measures.

Last week, a16z also voted against a plan to devote $25 million in UNI to yield farming, with the profits going to the analytics company Flipside Crypto. A lack of openness and supervision was a driving element, according to Amico, in a Twitter thread explaining the vote's rationale:

The Flipside vote was controversial and ugly, even by the standards of sometimes-rogue DeFi governance forums, with bugs flipping intended "No" votes to "Yes" and several parties with connections to a16z openly arguing on Twitter.

The proposal received a final vote of 47,624,544 in favor to 46,988,497 against (meaning UNI owners representing 18% of the circulating token supply voted, an unusually high percentage), but it was canceled because Index Coop, which delegated its UNI to Flipside to make the proposal, fell below the required UNI ownership threshold to keep the proposal alive.

A16z and its delegates controlled a significant chunk of the voting power. a16z delegates Dharma, Argent, the Stanford blockchain club, the Columbia University blockchain club, and Compound contributor Getty Hill cast a “No” vote with just over 15 million UNI ($375 million), while a16z delegates Dharma, Argent, the Stanford blockchain club, the Columbia University blockchain club, and Compound contributor Getty Hill contributed another 22,728,754 million UNI – nearly 40% of the UNI represented in the vote.

When people having a financial connection with a16z are included, such as Robert Leshner, the founder of the a16z-funded Compound, the proportion rises.

Sybil.org, a dapp that makes delegating DeFi governance votes simpler, reveals that a16z's 15 million voting stake is split across ten wallets.

A16z has never revealed how many governance tokens they own in popular DeFi protocols like Maker, Compound, and Uniswap. OpenSea and Nansen are two of the VC firm's investments in businesses that are anticipated to issue governance tokens.


The “open sourcing” of the delegate program, according to Amico, is an attempt to reveal how a16z handles protocol governance.

“If there has been a flaw so far, it has been a lack of transparency,” he said.

Moving forward, the aim is to “build in public.” According to Amico, one important lesson from the Flipside vote is that there is a strong desire for more public government discussion. As a result, he told CoinDesk that in the future, the Protocol team would communicate its views on governance issues more often.

Additionally, if smart-contract-based assurances of delegate independence (rather than potentially weak legal ones) become available, a16z said that the team would be open to transferring voting authority to a decentralized organization such as a DAO.

The team has also released the specifics of their delegate selection process on the software development platform and open-source hotspot GitHub, and is welcoming public comments, contributions, and discussion in a symbolic gesture considering that there is little to no related code.

Finally, a16z's Amico said that a long-term goal is to encourage other big token holders, such as venture capitalists, to reconsider their approach to governance: 

"Our hope is that by providing a methodical, deliberate way to accomplish this, others will attempt it as well."

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