A well venture capital firm in crypto is releasing tools that it claims will help numerous blockchain projects achieve decentralized governance.
The cryptocurrency industry adores the concept of “decentralization” in which blockchain initiatives are run by a diverse community of token holders who aren’t beholden to any single institution. However, due to a small group of founders and investors controlling the majority of the tokens, most crypto projects remain extremely controlled.
That’s why Andreessen Horowitz (commonly known as a16z), the world’s largest crypto investment firm, has launched a new endeavour.
In a blog post published on Thursday, the company stated that it is “Open Sourcing Our Token Delegating Program,” which will mean sharing tools it has developed in order to promote more decentralized governance.
These materials include legal agreements as well as a set of criteria devised by a16z to examine whether a corporation or organization is a good candidate for a share of the voting tokens that determine whether a blockchain’s protocol should be changed.
According to a16z, some of the tokens it owns in decentralized finance projects such as Compound and Uniswap have already been assigned voting rights.
It began by giving voting rights to a small number of entrepreneurs, but has now expanded the list of recipients to include university blockchain clubs and non-profit organizations such as Kiva and Mercy Corps. Here’s a screenshot of the announcement graphic from the a16z blog post:
In an interview with Decrypt, a16z crypto partner Jeff Amico stated the idea arose partly as a result of certain entities with a substantial stake in a project’s tokens choosing to “do nothing and pretend they don’t have the power.”
Amico went on to say that a16z is attempting to put what it teaches into practice by expanding the number of groups to which it grants voting rights.
On a practical level, the delegation procedure entails a token holder delegating voting rights to a third party via blockchain for a set period of time while keeping ownership rights.
The delegates can then vote on various proposals impacting the blockchain in question as they see fit during the period in which they are allocated voting powers (see recent instances of recent proposals concerning the Uniswap and Compound protocols).
According to a16z, its delegates are truly independent, having voted against the firm’s advice on countless occasions. While a16z has the authority to withdraw voting rights, the company claims it will do so only in exceptional instances, such as when a delegate acts in bad faith and undermines the project.
While a16z has a huge influence in crypto due to the amount of its investments and early bets on firms like Coinbase, the firm has also ruffled some feathers due to its dominance and penchant for courting notoriety.
Meanwhile, some may wonder if the company, which has ties to practically every significant cryptocurrency project, is the best candidate to carry the decentralization banner.
a16z’s Amico, on the other hand, dismissed the idea of the company acting as a puppet master over how its delegates vote on various proposals as “absurd” and stated that the company is committed to handing over control of blockchain protocols to responsible third parties.
A16z’s tools include a list of best practices and a scoring system that awards points based on characteristics including knowledge, commitment, and the absence of conflict.
It’s too early to tell how a16z’s initiatives will affect the way big blockchain projects distribute voting rights. However, if the firm’s request is echoed by other prominent token holders, the crypto sector as a whole might take a substantial step closer to the oft-repeated goal of decentralization.