At the Ethereum Community Conference 5 in Paris, Hilary Kivitz, an advisor at Web3 and former partner at a16z Crypto, discussed decentralized autonomous organizations (DAOs) and the countermeasures they could employ against hostile takeovers.
Kivitz discussed protection concepts in traditional finance that could be applied in DAOs to help combat the growing risk of hostile takeovers.
Kivitz argued that There are risks within DAO governance, including vote buying that allows attackers to exploit it. According to Kivitz, this may allow exploiters to raid DAO treasuries and take their locked assets.. He also shed light on the empty vote, explaining:
“The mechanic is that the exporter would borrow the token, run the vote, and return the loan on the token.”
Kivitz noted that the traditional financial tools used to combat these risks could also be applied in the context of Web3.. One of the solutions he presented is “poison pills”a mechanism in traditional finance that can raise the cost of acquisition and create other disincentives for hostile takeover attempts.
Kivitz said these poison pills could be incorporated into smart contracts and governance documents so they couldn’t be voted out. This could “create massive dilution for the exploiter”said.
In addition to poison pills, Kivitz also discussed vote clipping, which involves limiting the amount of voting power an incumbent can have, regardless of how much they hold within the network.. This ensures that the vote is fair to other holders with less property.
In February, the Marshall Islands officially began recognizing DAOs as legal entities, allowing collectively owned and managed blockchain projects to register and establish themselves in the country.
In early July, the cryptocurrency content author Alex Tapscott told Cointelegraph that developments in DAOs are one of the main things investors need to watch out for during the crypto winter. Tapscott said that DAOs could potentially complement corporations as a method for organizing resources.
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