DAO drama has as soon as once more hit Sky (previously Maker) governance, in what’s being characterised as a dangerous energy seize or a “potential governance attack,” relying on who you ask.
The controversy kicked off when GFX Labs’ PaperImperium — a long-time Maker neighborhood member and common critic of the venture’s latest course — took to X to lift considerations over a fast-tracked governance proposal which relaxes restrictions on borrowing towards the MKR governance token.
The modifications which, in accordance with the thread, ”bypassed due course of” would have the impact of “>2x the credit line for MKR holders, and raise the LTV from 50% to 80%”.
PaperImperium additionally claimed that they, in addition to GFX Labs, had been banned from the governance discussion board in the course of the proposal.
Threat administration and censorship considerations apart, the thread additionally worries that skirting the usual governance course of would “delegitimize” Maker’s reassuring status for “boring, process-driven governance with its own legal code.”
The put up picked up loads of curiosity in decentralized finance (DeFi) circles, with the proposed loosening of borrowing restrictions doubtless reminding most of the dangerous actions of Curve Finance founder Michael Egorov.
After borrowing thousands and thousands of {dollars} value of stablecoins towards extremely leveraged CRV collateral, Egorov’s positions spectacularly blew up in June final 12 months when he was liquidated throughout a number of DeFi lending protocols.
The context wherein the accepted emergency “Out-of-Schedule Executive Proposal for Community Security” was made, nonetheless, was conveniently overlooked of the unique thread.
Recognizing that the proposal “may generate discussion,” the modifications purport to supply “greater flexibility and responsiveness to emerging threats while maintaining community oversight.”
Worries inside Maker about “malicious governance actions” look like primarily based on “screenshots and whistle-blower reports,” although the proof seems to point “very little likelihood” of success, in accordance with the proposal, which is being made “out of an abundance of caution.”
Nearly all of replies to the proposal referred to as for additional clarification, however the vote was handed earlier than any extra particulars had been offered.
The screenshots in query might be discovered on this put up from Phoenix Labs’ CEO Sam MacPherson (a Spark and ex-Maker contributor) and element a plan to build up MKR voting energy and conduct a “takeover” of the protocol’s governance.
Extra screenshots present Maker founder Rune Christensen describing a supposed plan to “force liquidations” of MKR positions, as a way to choose up low-cost governance tokens backed by “a crooked mercenary capital fund” who’ve a historical past of “leeching” off DeFi protocols.
DeFiLlama’s “0xngmi” neatly summed up the rationale behind the modifications from a third-party perspective, saying, “So the thought is that Rune has a bunch of MKR/SKY on Aave and morpho for his loans, however he can’t vote with these tokens.
They added, “He wants to move those loans to Maker so he can vote with them and thus make it harder for others to outvote him in a governance attack against him.”
Governance assault or activist investing?
That is removed from the primary time a DeFi protocol has been caught up in a debate concerning the accumulation of voting energy in on-chain governance techniques.
In 2023, initiatives akin to Rook and Aragon had been focused by a bunch dubbed the RFV Raiders, who recognized DAOs with treasury holdings valued larger than the value of a controlling stake of governance tokens.
At present, the Aragon Affiliation acted on its fiduciary responsibility to safe its treasury by repurposing the Aragon DAO right into a grants program.
This can be a response to a coordinated assault by the group referred to as “Risk Free Value Raiders” who took down Rook DAO. 
https://t.co/tVp9QXUUsx
— Aragon.eth 
(@AragonProject) Could 9, 2023
Then final 12 months, Compound DAO handed a proposal to maneuver half 1,000,000 COMP tokens (value $25 million on the time) to a brand new vault arrange by a bunch referred to as the Golden Boys who had gathered sufficient tokens to vote by way of the modifications.
Nevertheless, the de-facto chief of the group, Humpy, who had beforehand pulled the same scheme on decentralized change Balancer, rejected the accusation of “stealing” funds.
The “Trust Setup” multisig, he claimed, would solely enable for withdrawal of the funds if voted by way of by the DAO, earlier than signing off with, “On that note, I’d like to thank all holders who voted for our proposal.”
