Today, the following letter was sent to a16z, arguably the most prolific and powerful venture capital firm in DeFi. a16z has major token holdings and voting rights in critical DeFi projects including Uniswap, Compound and Maker. Follow Chris Blec on Twitter for updates.
Here is the text of the letter:
a16z Crypto Team
Sent via email &Twitter DM
As you aptly stated in the blog post On Crypto Governance, “Crypto protocols are meant to be governed by decentralized communities of stakeholders.” DeFi Watch and its supporters whole-heartedly share this goal. However, in recent days and weeks, there has been growing concern over the confusing role that venture capital firms such as a16z are playing in decentralized communities. This was particularly evident throughout the recently concluded UNI “DeFi Education Fund” proposal, in which the fate of nearly $20 million from the Uniswap treasury was largely decided by a16z delegates.
I am writing with hopes that we can work together to obtain the transparency that DeFi participants are justifiably seeking. These concerns come with a full appreciation for the powerful role that VCs like a16z play in helping a DeFi startup get off the ground and in getting a DeFi product to market. We do not seek to change or criticize the way that you invest or manage your portfolio. We only seek transparency in how you have chosen to participate alongside other tokenholders in decentralized governance systems. This information is critical for us to be able to assess the value of our own financial investments in these DeFi ecosystems.
Due to the nature of a16z’s business, we understand that you have received millions of voting tokens for several different DeFi projects in exchange for your investments. This list of projects include critical DeFi infrastructure projects like Uniswap, Compound and Maker. For some of those projects, we understand that you have chosen “delegates” to participate in decentralized governance systems on your behalf. You have also indicated that those delegates are able to act independently from your organization. The challenge for users when trying to fully understand a16z’s influence is that we do not know who all of these delegates are, how they are chosen, or if undelegated a16z voting is occurring from other wallets. This makes it impossible for tokenholders to understand the full impact that a16z and its delegates are cumulatively having on DeFi voting mechanisms.
Following is a brief list of questions which I hope a16z will consider answering in the name our shared quest for transparency:
- Does a16z have a formal policy on how DeFi vote delegation works? If yes, would it be possible for you to share it?
- What criteria is used when evaluating potential delegates? Can you provide an example of what would cause a16z to choose one delegate over another?
- Who are the key people at a16z in charge of the vote delegation process?
- Does a16z inform all delegates that a16z is behind the delegated power? Are any delegates unaware that a16z is the entity that has delegated to them?
- Does a16z interact with delegates after voting power is delegated to them? If yes, how often and under what circumstances?
- Has a16z placed any requirements on delegates with regard to what positions they take, how often they vote, what issues they choose to vote on, or what proposals they may or may not introduce?
- Has a16z withdrawn delegated votes from any of its delegates? What caused this decision to be made?
- Would you consider providing a list of the individuals and entities that a16z has delegated voting power to, including which token was delegated and in what quantity?
- The only way that users can fully understand a16z’s voting influence is with full visibility into all of its voting wallets. Would you consider sharing information on a16z’s token holdings for each DeFi project in its portfolio, along with associated wallet addresses? If this is not possible, please help us understand what business, legal or security issues may be standing in the way of this transparency.
Thank you in advance for working with us toward transparency on these issues. We are interested in working together toward a solution that works for all involved. If you consider any of these questions to be unanswerable, it would be very helpful if you could help us understand why they are unanswerable. In other words, we also are asking for transparency into the reasons that full transparency may not always be possible.
Please contact me at [email protected] with your reply, which I will gladly publish on my website defiwatch.net. Alternately, I suggest publishing a blog post on a16z.com which answers these questions and any others that you think may be relevant. If you’d prefer, I’d also be happy to arrange for a public voice chat via Twitter Spaces to discuss these issues.
With sincere hope for a productive conversation,
Founder, DeFi Watch