The DeFi Education Fund proposed by Harvard Law Blockchain & FinTech Initiative (HarvardLawBFI) sought for 1 million UNI tokens worth $20 million was voted into existence in a governance proposal.
DeFi Education Fund’s Controversy
The Decentralized Finance (DeFi) Education Fund is a nonprofit entity created to provide political, educational, and legal engagement grants. It successfully obtained the UniSwap grant worth $20 million. The proposal was outlined by Harvard Law Blockchain & FinTech Initiative (HarvardLawBFI).
It is a legitimate and beneficial campaign to the community. The initiative seeks to defend the protocol from legal and regulatory threats.
The regulatory threats on DeFi protocols are a valid concern that needs to be adequately addressed. Dan M. Berkovitz, in a keynote address for Commodity Trading Futures Commission (CFTC), questioned the legality of DeFi. This clout has been building momentum as DeFi continues to grow.
However, the recent decision to sell half of the allocated grant has raised eyebrows.
The sale caused controversy because the HarvardLawBFI had tacitly assured that the allocation would be utilized over 4-5 years. Although there was no specific vesting period, the Uniswap community was under the impression that the sale would not affect $UNI’s price.
The Need to Sell
Critics have begun to question the almost immediate decision to dispose of half of the grant. The decision is questionable because the proposer addressed this concern on numerous occasions.
The board must account for the pressing need to sell after acknowledging that a massive sale would be a problem. The platform has its own rules of governance. Being the recipient of a community grant, the responsibility to account for the community is a fiduciary duty. A fiduciary duty exists in a relationship of reposed trust and confidence.
There is no vesting schedule on the use of the grant. It is not a blanketed oversight. The purpose was to give the board flexibility in the use of the grant as they deem fit. However, well-entrenched principles of trust guide the relationship. With the controversial decision, the board now has to explain why they sold half of the grant.
The fiasco is further fueled by an allegation that Larry Sukernik, one of the multi-signers of the DeFi Education Fund five hours before the 500,000 UNI tokens were sold.
Crypto assets that are openly traded are sensitive to price fluctuations. Team incentives, rewards, or grants can affect price fluctuations as tokens will be flooding the market. With this current controversy, future grants would require the proposers to commit to a vesting schedule with some allowances for emergencies.
Influence by Large Delegators
Carles Watkins, a core team member at Curve Finance, also identifies an ‘opaque lobbying organization’ as one of the problems in this controversy. Large delegators wield too much influence on the protocol’s governance.
Protocol governance allows for community inclusion through a democratic process by votes. This criticism, however, may not hold water as the democratic process involves a free and unbridled exercise of discretion.
Legitimate Reason to Inquire Further
The grant, unlike private funds, is subject to good faith. Good faith is measured by the conduct and transparency in the management of the funds. The board does not have free reign.
The community can dictate that proposals in the future must spell out the vesting schedule of the funds. Immediate reparative steps to regain the confidence of its community is to explain the reason behind the decision to sell.
Source : bsc.news
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