Ethereum co-founder Vitalik Buterin has taken a deep dive into token-based decentralized governance, suggesting that existing voting mechanisms are flawed and may be belongings the decentralized finance (DeFi) sector back from realizing its full potential.

In a lengthy blog post published on Monday, Buterin stated that the crypto community needs to "motion beyond coin voting equally information technology exists in its present form."

Currently, the majority of DeFi projects manage their protocol upgrades, reward issuance and other facets of governance elections, where votes are distributed amid token holders according to the size of their holdings.

Still, many projects have come up under fire for assuasive their voting process to be dominated by whales holding vast swathes of the governance tokens, allowing them to vote in support of their personal interests.

Buterin highlighted 2 issues relating to token-based governance, emphasizing the risk of incentives misaligning amongst customs members and its vulnerability to "vote-ownership" and "outright attacks" influencing the upshot of governance votes. He added:

"The most important affair that can exist washed today is moving away from the idea that coin voting is the only legitimate class of governance decentralization."

Buterin noted the prevalence of "unbundling," whereby "vote-buying" can be achieved and governance systems can exist manipulated past borrowing on crypto collateral and using the tokenized assets to vote.

In the context of unbundling, "the borrower has governance power without economic interest, and the lender has economic interest without governance ability," he added.

Looking beyond token-based governance, Buterin advocated the exploration of "Proof-of-Humanity"-based governance systems where ane vote is allocated per each of a protocol'due south users.

Buterin also offered "Proof-of-Participation" equally a possible solution, where voting is express to the users of a protocol who take contributed piece of work to the benefit of a project or its community, suggesting voting rights could exist exclusively distributed to addresses that complete a specific chore.

The Ethereum co-founder too suggested that quadratic voting — where the power of a unmarried voter is proportional to the square root of the economic resources that they commit to a decision — could offer unique solutions to decentralized governance.

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He likewise suggests a "skin in the game" approach that makes individual voters responsible for their decisions, stating:

"Money voting fails because while voters are collectively accountable for their decisions (if everyone votes for a terrible decision, everyone's coins drop to zero), each voter is not individually accountable."