The Governance of Degenerates Part I: Emerging dynamics

Defining DeFi governance

In the emerging area of DeFi, automation is integral to the workings of financial infrastructures, enabling decentralised trading exchanges and, in some instances, helping to produce stable assets. Many DeFi applications incentivise people to contribute to liquidity pools, which are necessary for automated market-maker (AMM) algorithms and some stable coins to work effectively. Governance rights are therefore directly attached to responsibilities and economic incentives. In essence:

Fair launching and governance whales

When governance tokens are offered as incentives to provide liquidity, those who can provide more liquidity have greater power. Governance ‘whales’ — those with large stores of governance tokens — can become the primary decision-makers. This resembles share-holder governance without regulatory limits, although other features can alter or weaken this likeness.

“Humpback Whale” by rjshade is licensed under CC BY 2.0

Fast-forks and Sushiswapping

Copycat DeFi applications also complicate fair launch intentions. SUSHI was an example of a ‘fast-follower fork’ that copied the code of Uniswap, did a zero-value token launch and gave 100% of its tokens to anyone who participated (beating the well-established Uniswap to its own investor-led token launch). Copycat applications are interesting to observe in terms of their durability — i.e. whether loyalty and governance emerges within new systems or whether they are short-lived, opportunistic yield farming events.

Degenerate Clubs

Finally, DeFi applications exhibit club-like qualities, even though participants by definition do not have to know each other to participate. Launches are generally discovered through networks and social media among yield famers who refer to themselves as the DeFi Degenerates. Memes are a common communication device, with some tokens created as ‘meme-coins’ using emoji food icons to make them instantly recognisable. The game-like qualities of yield farming also works to attract users.


My starting point here has been to identify some of the dynamics that are emerging from DeFi by paying attention to actors and events. The next task is to begin to measure governance in these systems. Some clear lines of investigation flow from the above:



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Ellie Rennie

Ellie Rennie


Professor at RMIT University, Melbourne. Australian Research Council Future Fellow 2020–2025: “Cooperation Through Code” (FT190100372) Twitter: @elinorrennie