Vitalik Buterin Opposes Governance Token Speculation
Ethereum founder Vitalik Buterin has expressed strong opposition to the speculation and hoarding of governance tokens.
Vitalik Buterin Opposes Governance Token Speculation
Originally, governance tokens were created to facilitate voting on community proposals, with the number of tokens held determining the voting power. However, Vitalik Buterin has voiced concerns that governance tokens are being "distorted," as many individuals are either selling them for profit or hoarding them to gain more control—actions that contradict the principles of decentralization.
On November 29, Vitalik shared his perspective:
The notion of "governance rights" as a narrative for why a token should be valuable is pathological. You're literally saying "I'm buying $X because later on someone might buy it from me and a bunch of other people to twist the protocol toward their special interests"
— vitalik.eth (@VitalikButerin) November 29, 2022
“The idea that 'governance rights' make governance tokens valuable is mistaken. It’s like me buying $X with the expectation that someday someone or a group will buy it from me to make the protocol advantageous for them.”
He further noted that this trend opens up vulnerabilities, allowing malicious actors to attack the protocol. Vitalik also criticized the practice of speculating on the future price of governance tokens.
Not all DAO tokens are created equal, though; some have uses beyond governance. For instance, ApeCoin was initially launched as a DAO token by Yuga Labs to allow NFT holders to vote in the ApeCoin DAO. Yet, it has become actively traded and speculated on, similar to Bitcoin or Ethereum.
ApeCoin has also been adopted as a payment method for Yuga Labs’ NFTs and the upcoming game, Otherside. Additionally, Gucci has announced it will accept ApeCoin at certain stores.
Even as Buterin calls on crypto users to reconsider the value of “governance rights” and eliminate motives contrary to decentralization standards, significant changes in user behavior remain uncertain.
Instead, the Ethereum founder has proposed creating a new token standard for governance with non-transferable properties, called “Soulbound Tokens (SBTs).”
