Third Time's the Charm? First Came ICOs, Then Came The DAO, and Today It's The LAO

Also Compound Finance's token-based governance gains steam, Futureswap shuts down Alpha version.

Hello Defiers! Lots going on in decentralized finance:

  • The LAO launches today with high hopes of revolutionizing venture investing

  • Compound Finance token-based governance system gets first user proposal

  • Futureswap shut down after volume surged on unaudited platform

  • Developers are building an Ethereum-compatible smart contracts platform on Polkadot

and more :)

Also, don’t forget to listen to last week’s podcast episode with MEW founder Kosala Hemachandra.


🙌 Together with Eidoo, a cryptocurrency-powered debit card and platform for easy access to decentralized finance.


Compound Rolls Out Community Governance

Compound Finance received the first user-generated proposal on its new governance system. If the proposal passes, it would be the first DeFi protocol upgrade proposed and built entirely by a user of the platform, and not the protocol’s team or foundation.

Dharma, a lending platform that’s built on top of the Compound protocol, yesterday proposed to change to the way Compound calculates interets rates in the Dai stablecoin so that when the benchmark Dai Savings Rate is at zero, and Compound’s loan utilization rate is below 90%, depositors still earn some interest (around ~1%), while with the current model suppliers earn “practically nothing” under those conditions, the proposal says.

Image source: compound.finance/governance

Token democracy

The move is part of a broader trend within decentralized finance, for teams behind protocols to hand over major decision-making to their communities. The goal is to remove centralized points of failure and make these systems more censorship resistant. Decentralized governance is largely executed through platform-specific tokens, where token holders can vote on decisions based on how many tokens they own. MakerDAO is the biggest project with such a system, while other major DeFi projects like Kyber Network and Synthetix are also moving in this direction.

Compound on April 16 handed major decision making over to COMP token holders. Currently Compound Labs Inc. shareholders and Compound team members are the only COMP token holders, while 50% of the total supply of tokens has been set aside for users of the platforms at a later time. Still, token holders are able to delegate their votes to other Ethereum addresses, opening up participation in the system.

The first proposal to Compound’s governance system, which puts whether to add the Tether stablecoin to the lending platform up for a vote, was made by the Compound team itself last week. Dharma’s proposal would be the first by a user of the protocol within the Compound governance and possibly within DeFi itself as in most cases upgrades are designed and suggested by the teams or foundations leading the platform. It offers a glimpse into a future where stakeholders of a platform can exert meaningful change.

The LAO Venture Fund Launches Today

A new model for venture investing is launching today.

Developers and entrepreneurs keep wanting to make capital formation happen on Ethereum. First with ICOs, which created a wild west of startups issuing coins to raise money, then with The DAO, a venture firm which ended up breaking securities laws.

The LAO, which was crated by the team behind OpenLaw, is betting this time it got it right. It wants to act enough like a venture fund to bet on promising projects poised to deliver, and not scams common in the ICO era, and do it in a legally compliant way. But it also wants to act enough like a DAO that it opens the fund to a wider group of investors and projects, and makes the whole process more efficient.

12,000 ETH

The LAO today is starting to accept investor contributions, with plans to raise up to 12,000 ETH (about $2.4 million). Each member can contribute 120 ETH for 1% of the LAO’s voting rights and profits.

Much like in a venture fund, The LAO members pool capital to invest in promising early stage ventures. The difference is that while it’s a Delaware limited liability company, it’s also organized as a blockchain-based company. That means its legal paperwork lives in smart contracts (organized by the OpenLaw system), members hold tokens linked to the organization, and funds are held in an Ethereum address.

Unlike most Silicon Valley funds, in which a small set of general partners make decisions, any accredited US investor and anyone outside of the US can buy LAO tokens to become a member of The LAO — though there’s a 100-member limit. Tokens give LAO members the right to vote in all major decisions, including where to invest funds, and also the right to receive profits in proportion to the tokens they hold.

After a 7-day voting period, funds can be deployed in seconds.

Permissionless Silicon Valley

The standard investment agreement is $50k in ETH per project (The LAO uses Chainlink oracles to determine the ETH/USD rate). Investors receive a convertible note which gives them the right to participate in future tokens sales, if the team decides to issue tokens. The LAO can invest in startups based anywhere in the world, but they’ll have to set up a US entity to do so. Projects have already started applying. They include Idle Finance, Our Zora, Maple Finance, Affogato and Gelato Finance.

The experiment to make a more “permissionless Silicon Valley” comes a time when the deepest financial crisis since the Great Depression looms over the globe and startup funding dries up. It might contribute to make one of the riskiest corners in tech, crypto startups, a bit more resilient.


Sponsored

Eidoo Launches Pre-Orders for Crypto Debit Card

DeFi platform and smart wallet Eidoo recently launched pre-orders for its new debit card offering up to 10% crypto cashback, available to all EU and UK-based users. 

The Eidoo Card brings your non-custodial wallet to life. Cards provide full control over your funds, enabling you to instantly convert your BTC or ETH to spend in stores or online globally, or even withdraw from ATMs, anywhere major cards are accepted. 

Cards come in Basic, VIP and Black accounts (the first metal card for DeFi), making crypto easily usable and accessible in day-to-day life for any level of holder. With regular “crypto cards” users must preload their funds onto the card or use a centralized exchange, which can sometimes take days and include costly fees.

For VIP and Black cardholders, you can level up your DeFi experience with a range of benefits and rewards (https://eidoo.io/crypto-debit-card). This includes subscriptions to streaming services, hotel and travel vouchers, airport lounge passes and even access to private jet programs.

Users must burn or stake tokens to pre-order their card, in true DeFi fashion. Over 2 million tokens have already been staked by crypto users claiming their cards. Discover how to claim yours here or download the app to get started.


Futureswap Shuts Down After Trading Volume Surges

Futureswap, an Ethereum-based trading platform which offers up to 20x leverage, shut down an Alpha version of its platform on Saturday after amassing over $17 million of trading volume and almost $1.4 million of liquidity in three days.

The project is undergoing an audit by Open Zeppelin and their code is not open sourced, which had been two red flags when funds handled by the platform quickly started to grow. The 4-person team said they'll release the full audit report before re-launching and will open source their code “during (their) full release.”

In light of the recent attacks and hacks to DeFI platforms, it’s a good sign some teams are becoming more cautious.

Polkadot to Launch with Ethereum-Compatible Platform

Blockchain infrastructure company PureStake said its building Moonbeam, a smart contract platform which will be compatible with the Ethereum blockchain. Moonbeam would allow developers to transfer existing Ethereum dapps and create new dapps using Ethereum development tools like Truffle and MetaMask.

“Getting traction for a new developer platform is a numbers game,” wrote PureStake founder and CEO Derek Yoo “By providing Ethereum compatibility, we give ourselves access to the largest market of existing blockchain developers.”

Moonbeam is based on Parity Technologies Substrate blockchain development framework, and would be a parachain —similar to a shard— within the Polkadot network. The platform will be released together with the Polkadot network launch.

DFINITY Cofounder Launches $20 Million Venture Firm

DFINITY co-founder Cedric Waldburger launched Tomahawk.VC, a $20 million venture fund focusing on “global-first companies,” which have remote teams and are not tied to specific geographic locations. The fund has so far invested in four companies: Locatee, Lano, Liquity and Buynomics.


Lendf.Me Distributes Recovered Stolen Funds to Users

“If you were harmed by this attack, we will make you whole again,” wrote dForce founder Mindao Yang. “We will come out the other side of this ordeal stronger, and this is the first step.”

Post-Mortem: Hegic Unlock Function Bug or Three DeFi Development Mistakes That I Feel Sorry About

Hegic is a decentralized options trading market which launched with a bug on its code, putting users’ funds at risk. “I’m humbly asking you to exercise your active options,” wrote Hegic founder who goes by the name Molly Wintermute. “If you won’t do that, your contract will expire worthless and the funds (size of your option) will be forever locked on the contract. I’ll refund 100% of the premium that you’ve paid plus the net negative P&L.”

Everest Creates a Crunchbase for Web3 Companies

Everest wants to “catalyze the shift to Web3 by creating the first decentralized registry to provide ongoing utility to the crypto community.”
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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.