Whale Vote: How Sky’s Decentralized Community Preserved Its Identity Against Maker Protocol
Background:
In the world of decentralized finance (DeFi), two prominent protocols, Sky and Maker, clashed over a contentious issue known as the “Whale Vote.” This event shed light on the importance of decentralization, community governance, and the potential risks of centralized entities in the DeFi space.
The Whale Vote Debate:
The Whale Vote debate arose when the Maker Protocol, which issues Dai stablecoin, proposed a governance vote to prevent large whale transactions from affecting the stability of the Dai price. Sky, a decentralized finance protocol built on Ethereum, disagreed with this proposal, arguing that it went against the fundamental principles of decentralization and community governance.
Decentralization and Community Governance:
Sky believed that decentralized finance protocols should be community-governed, where all token holders have an equal say in the decision-making process. They argued that a centralized entity like Maker, with the ability to propose and execute votes, could potentially manipulate the system to its advantage, undermining the decentralized nature of DeFi.
The Community Response:
In response to Maker’s proposal, the Sky community rallied together, mobilizing their collective influence to vote against it. They used various tools and platforms, such as Gitcoin, Gnosis, and Aragon, to coordinate their efforts and amplify their voices in the decentralized voting process.
The Outcome:
The Sky community’s united front paid off, as the vote to reject Maker’s proposal received a resounding majority. This victory served as a powerful reminder of the importance of decentralization and community governance in the DeFi space, demonstrating that even small communities can make a significant impact when they come together to preserve their identity.
I. Introduction
Explanation of the context:
The world of decentralized finance (DeFi) has been making significant strides in the crypto sphere, and its importance continues to grow exponentially. Let’s take a brief journey through the history and evolution of DeFi:
Brief history and evolution of DeFi:
DeFi refers to the use of decentralized networks, blockchain technology, and smart contracts to create financial applications that mimic traditional financial instruments without intermediaries. Its roots trace back to 2014 with projects like Bitshares and Ethereum, but it wasn’t until 2017 that DeFi began to gain traction with the launch of Decentralized Autonomous Organizations (DAOs) like DAO and Augur. Since then, numerous projects have emerged, offering decentralized lending, borrowing, trading, derivatives, and more.
Increasing adoption and usage:
DeFi has seen increasing adoption, with a growing number of users seeking the benefits of decentralized finance. As of Q3 2021, over $100 billion in assets were locked in DeFi smart contracts – up from just $1 billion a year ago. This growth is driven by the borderless, censorship-resistant nature of decentralized finance and its potential for higher yields compared to traditional financial systems.
Introduction to Sky and Maker Protocol:
Sky
Description of Sky project:
Sky is a decentralized autonomous organization (DAO) specifically designed for whale investors in the decentralized finance space. Sky’s mission is to create a platform where these large investors can pool their capital, collaborate, and provide liquidity for the DeFi ecosystem.
Key features of Sky include:
- A decentralized governance system, allowing community members to vote on proposals and decisions
- An investment pool that utilizes a diversified strategy, allocating funds across multiple DeFi projects
- A treasury system for managing and distributing rewards to community members based on their contributions
Maker Protocol
Overview of Maker Protocol:
Maker Protocol
is a decentralized lending system built on Ethereum, which allows users to generate Dai – a decentralized stablecoin pegged to the US dollar. The Maker Protocol uses smart contracts and collateral to facilitate lending, enabling users to borrow Dai without intermediaries.
Key features of Maker Protocol include:
- Multi-Collateral Dai (MCD) – A system where multiple assets can be used as collateral to generate Dai
- Automated risk management and liquidation systems
- Flexible credit lines, allowing users to adjust the size of their loans based on their needs
Background: The Conflict Between Sky and Maker
The conflict between Sky and Maker, two prominent players in the Decentralized Finance (DeFi) community, arose from a proposed community vote within Maker that threatened Sky’s identity.
Explanation of the issue:
Maker, a decentralized lending platform built on Ethereum, announced a community vote to implement changes in the system known as Multi-Collateral Dai (MCD). This proposal aimed to introduce new collateral types and improve the overall stability of the Maker protocol. However, the potential impact on Sky, a stablecoin backed by the value of Ethereum (ETH), was significant.
Description of the proposed Maker vote and its potential impact on Sky:
The proposed changes in MCD included a switch from Single-Collateral Dai (SCD) to Multi-Collateral Dai, which could potentially lead to the devaluation of existing collateral types like ETH. While Sky was not directly affected by this change as it was an independent stablecoin, its value could be influenced indirectly through the fluctuation in Ethereum’s price. This uncertainty led to concerns among Sky users and holders, who felt that their investment could be negatively affected if ETH’s value dropped significantly.
The significance of this issue within the DeFi community:
This conflict between Sky and Maker resonated deeply within the DeFi community, as it highlighted the potential risks and challenges associated with decentralized systems. The proposed changes in MCD were a testament to the evolving nature of DeFi protocols, which could lead to both innovation and instability. The response from various stakeholders in the community showcased the complexity of managing change within a decentralized ecosystem, as well as the importance of clear communication and collaboration between projects.
Sky’s initial reaction and response:
Understanding of Sky’s concerns and motivations to preserve their identity:
Sky and its developers understood the potential implications for their project if Ethereum’s value were to decline drastically. They saw it as a threat to their identity, which was built around being an ETH-backed stablecoin. Preserving that identity was crucial for maintaining user trust and confidence in the project. They also believed that the indirect impact on Sky could lead to unnecessary volatility, which contradicted the fundamental goal of a stablecoin.
Initial communication with Maker and attempts at resolution:
Sky’s response to the proposed changes in MCD involved open communication with the Maker team. They expressed their concerns and advocated for potential solutions, such as implementing a bridge between Sky and Maker to insulate it from MCD’s impacts or exploring alternative collateral types. The discussions were ongoing, but both teams remained committed to finding a mutually beneficial resolution that addressed the concerns of all stakeholders.
I The Formation of the Sky Coalition:
Description of the Sky Coalition:
The Sky Coalition, a formidable alliance of decentralized communities, was formed with the common goal of supporting Sky’s cause within the Maker ecosystem. This diverse group of individuals and organizations joined forces due to their shared beliefs in preserving decentralization, promoting transparency, and ensuring the long-term sustainability of Maker DAO.
Motivations and reasons for joining the coalition:
Members of the Sky Coalition recognized that the proposed changes to the Maker protocol could potentially threaten the very foundation of decentralization. They saw the need for unity among like-minded individuals and organizations to ensure their collective voices would be heard in the upcoming Maker vote. By joining forces, they could amplify their influence and increase their chances of successfully countering those who supported the change.
Structure and organization of the Coalition:
The Sky Coalition operates as a decentralized collective, with each member maintaining their autonomy while contributing to the shared goal. Members collaborate on strategies, share information, and provide support as needed to ensure the success of Sky’s cause in the upcoming vote.
Strategies employed by the Sky Coalition to influence the outcome of the Maker vote:
Lobbying efforts:
The Sky Coalition engages in lobbying efforts to reach out to key stakeholders and influencers within the DeFi ecosystem. By fostering relationships with these individuals, they aim to build consensus and rally support for Sky’s cause among those who have significant influence in the Maker community.
Public relations:
Another strategy employed by the Sky Coalition is public relations. They utilize various channels to spread awareness about their cause and build support among the broader DeFi community. This includes engaging with media outlets, leveraging social media platforms, and hosting informational webinars and workshops to educate potential allies about the implications of the proposed changes.
Coalition members’ involvement in Maker Governance:
Lastly, the Sky Coalition encourages its members to increase their representation within the Maker DAO and voting power. By pooling their resources and collective influence, they aim to counterbalance those supporting the proposed change and ensure that decentralization remains a core tenet of the Maker ecosystem.
The Aftermath: A Victory for Decentralization and Community Power
IV.The Outcome of the Maker vote and its Significance
1.Description of the Final Result and Impact
The historic Maker vote on the proposed Whale Vote proposal came to a close, marking a significant moment for decentralized governance within the DeFi (Decentralized Finance) space. With 73% of the community voting in favor of the proposal, SkyDAO’s decision to engage with the larger MakerDAO community proved to be a wise move. This victory not only brought positive results for both the Sky1.Implications for Decentralized Governance The successful outcome of the Maker vote demonstrates the importance of community and decentralized governance in DeFi projects. It reinforces the notion that every voice matters, regardless of size or influence. This victory serves as a reminder for DeFi projects to prioritize their community’s input and foster a culture that values open communication and collaboration.
IV.2.Understanding the Importance of Community and Decentralized Governance The Whale Vote incident provided valuable lessons for SkyDAO and the broader DeFi community. It highlighted the need for a strong, engaged community that can effectively participate in governance decisions. By embracing decentralized governance and empowering its members, projects like Sky can build resilience and establish a more equitable ecosystem. The Whale Vote incident also underscored the importance of having clear conflict resolution mechanisms within a DAO framework. By fostering open dialogue and encouraging collaboration, projects can work through disagreements and maintain a strong sense of unity. Implementing tools such as arbitration or mediation services can further support fair decision-making processes.
IV.3.Plans for Growth and Expansion With the successful outcome of the Maker vote, SkyDAO is well-positioned to continue its growth and expansion within the DeFi ecosystem. The project plans to engage in more collaborations with other decentralized organizations, further emphasizing the importance of community-driven governance. As the DeFi space evolves, SkyDAO and other projects face challenges such as increased competition, regulatory scrutiny, and market volatility. However, these opportunities also present a chance to innovate, collaborate, and build more robust and equitable decentralized financial systems. By remaining committed to decentralized governance and community empowerment, projects like Sky can help shape the future of the DeFi space.IV.Lessons Learned from the Whale Vote Incident
2.Best Practices for Conflict Resolution
IV.The Future of Sky and the DeFi Community
3.Potential Challenges and Opportunities
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