DAO governance reduces risks for DeFi

According to the latest annual report from KuCoin Labs, “If DeFi aims to reduce regulatory risk, the form of DeFi governance will gradually become a DAO.”

The report further predicts that decentralized finance (DeFi) will still be a significant trend in the crypto industry in 2022. It points to the fact that the DeFi ecosystem has been “plagued by criminal whales” and that this has raised the prospect of increased risk. This situation has prompted calls for the regulation of decentralized finance; calls that come from inside the ecosystem in addition to pressure from external bodies.

With regulators more keenly scrutinizing DeFi, Kucoin predicts the industry may turn to DAO governance to reduce regulatory risks, and that is because “a DAO that puts community interest first can carry out “true governance decentralization.” It forecasts that the industry will see a shift in DeFi governance being coordinated using different mechanisms.

In relation to that, Kucoin’s report suggests, “the fundamental operational principles of DAOs are reasonable enough to be employed as foundations for the creation of legal entities.” However, this may not happen immediately. Rather, it is likely that we will not see a DAO expansion this year, but that there will be a refinement of the mechanisms instead, in preparation for adoption by companies and corporations.

To give a real life example of the use of DAOs in governance, we can look at the Marshall Islands in the Pacific. The islands now recognize DAOs as legal entities, meaning that they can register and operate legally within the island nation’s jurisdiction. It could be said that this represents proof that the DAO governance structure is indeed starting to become more prevalent in the blockchain world.

--

--

--

Creditum is the mobile application integrating regular cash with Crypto, Holding, Buying, Exchanging and Spending

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

Loyalty Program on Blockchain

[SkyPeople] UDC / ChinaJoy 2019 / OpenSea MOU

Why Blockchain Technology Matters

YAXIS: Emissions Schedule

OpenSwap Bridge Founder #5 GMX ($GMX)

Enhanced Feedback On EOS Core+ Blue Paper In this paper, EOS Core+ Blue Paper, The document…

Zenon Fabric — Paving the way for mass-scale adoption

SMART CONTRACTS AND THE NEED FOR ORACLE IN THE BLOCKCHAIN TECHNOLOGY

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Creditum.io

Creditum.io

Creditum is the mobile application integrating regular cash with Crypto, Holding, Buying, Exchanging and Spending

More from Medium

DAOs and their Influence on DeFi, Governance and Investment

DRCS Launch: A Breath of fresh Air for DeFi

FluidFi’s Unique Offering — Why Would You Ever Want to Use an Exchange Again?

My Revival DeFi Story