{"id":52962,"date":"2021-11-16T16:16:07","date_gmt":"2021-11-16T14:16:07","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=52962"},"modified":"2025-09-03T12:43:56","modified_gmt":"2025-09-03T09:43:56","slug":"study-finds-governance-defi-tokens-rarely-used-as-intended","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/study-finds-governance-defi-tokens-rarely-used-as-intended\/","title":{"rendered":"Study finds governance DeFi tokens rarely used as intended"},"content":{"rendered":"<p>Economist Alex Kruger has concluded that tokens issued under liquidity mining programs are often used inefficiently \u2014 most DeFi investors are eager to get rid of them.<\/p>\n<p><!--more--><\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Fascinating research. In Q3 Compound has paid $76m in as liquidity incentives and only $100k in grants.<\/p>\n<p>Of top 100 accounts, only 7 have held the tokens and only one has ever voted on a proposal.<\/p>\n<p>1\/ <a href=\"https:\/\/t.co\/HahWlxOK4N\">https:\/\/t.co\/HahWlxOK4N<\/a><\/p>\n<p>\u2014 banteg (@bantg) <a href=\"https:\/\/twitter.com\/bantg\/status\/1460078199648436226?ref_src=twsrc%5Etfw\">November 15, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>The researcher analysed on-chain data for the 100 largest holders of the native governance token <a href=\"https:\/\/u1f987.com\/en\/news\/what-is-compound-comp\">the Compound project<\/a>. According to his observations, 809,000 tokens of the project, worth more than $270 million (69% of the token&#8217;s circulating supply), were sent to these addresses.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>However, very few of them are COMP hodlers. Only 19% held more than 1% of the COMP; only 7% kept more than 50% of what they received. Do holders of mining rewards maintain an economic interest in the Compound protocol? No,<\/p>\n<\/blockquote>\n<p>Kruger is convinced that even fewer holders of native tokens participate in governance votes:<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>Logically, if so few addresses are hodlers, then an even smaller number of people vote.<\/p>\n<\/blockquote>\n<p>The author proposed the concept of &#8220;governance mining&#8221;, envisaging rewards for those who invest time and effort in developing the protocol.<\/p>\n<blockquote class=\"twitter-tweet\" data-conversation=\"none\">\n<p lang=\"en\" dir=\"ltr\">The author sees solution in &#8220;governance mining&#8221;, basically rewarding people who put time and effort into evolving the protocol.<\/p>\n<p>That\u2019s similar to how things work at <a href=\"https:\/\/twitter.com\/iearnfinance?ref_src=twsrc%5Etfw\">@iearnfinance<\/a>. You can still farm YFI, but only by putting in meaningful work, not with liquidity.<\/p>\n<p>2\/<\/p>\n<p>\u2014 banteg (@bantg) <a href=\"https:\/\/twitter.com\/bantg\/status\/1460078201661755395?ref_src=twsrc%5Etfw\">November 15, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>The problem could also be mitigated by implementing <span data-descr=\"staged unlocking of tokens according to a defined schedule\" class=\"old_tooltip\">vesting<\/span>.<\/p>\n<blockquote class=\"twitter-tweet\" data-conversation=\"none\">\n<p lang=\"en\" dir=\"ltr\">2. Create a vesting schedule for accrued tokens.<\/p>\n<p>To better align incentives, there could be a vesting schedule for when the underlying COMP tokens become redeemable.<\/p>\n<p>The rewards with vesting could themselves be tokens and retain (non-transferrable) governance rights.<\/p>\n<p>\u2014 DeFiCorgi.eth (@alex_kroeger) <a href=\"https:\/\/twitter.com\/alex_kroeger\/status\/1460053075691859972?ref_src=twsrc%5Etfw\">November 15, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>In his view, Compound&#8217;s liquidity mining program did not prove its worth \u2014 users never became governance participants.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>Regardless of what you think the goals of liquidity mining should be, the scale of these programs should be carefully assessed, weighing costs and benefits<\/p>\n<p>\u2014 Kruger concluded.<\/p><\/blockquote>\n<p>Earlier ForkLog <a href=\"https:\/\/u1f987.com\/en\/news\/compound-suffers-multimillion-dollar-losses-due-to-protocol-update-bug\">reported<\/a> multi-million losses at Compound due to a protocol update error.<\/p>\n<p>Subscribe to ForkLog news on Telegram: <a href=\"https:\/\/t.me\/forklogfeed\" target=\"_blank\" rel=\"nofollow noopener\">ForkLog Feed<\/a> \u2014 the full news feed, <a href=\"https:\/\/telegram.me\/forklog\" target=\"_blank\" rel=\"nofollow noopener\">ForkLog<\/a> \u2014 the most important news, infographics and opinions.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Economist Alex Kruger concluded that liquidity mining tokens issued under such programs are often used inefficiently.<\/p>\n","protected":false},"author":1,"featured_media":52963,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[3],"tags":[1494,1093,167],"class_list":["post-52962","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-analysis","tag-compound-comp","tag-defi","tag-research"],"aioseo_notices":[],"amp_enabled":true,"views":"25","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/52962","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/comments?post=52962"}],"version-history":[{"count":1,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/52962\/revisions"}],"predecessor-version":[{"id":52964,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/52962\/revisions\/52964"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media\/52963"}],"wp:attachment":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media?parent=52962"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/categories?post=52962"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/tags?post=52962"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}