Pantera Capital Partner on Decentralized Management of Crypto Protocols

Recently, Lauren Stephanian, a partner at crypto-focused investment firm Pantera Capital, shared her thoughts on some of the main issues with decentralized governance.

Stephanian made her comments while speaking Sept. 21 on a panel (titled “What’s Next for DeFi Governance”) at Messari’s annual conference Mainnet (September 21-23, 2022) in New York City:

She said:

• “One thing that’s interesting about governance in a decentralized world is that it means something different for each protocol, and you can set it up differently. You can have different thresholds for what it means to be a member entitled to vote, in contrast to centralized business, where normally only the board and a few managers have control.“
• “I think primarily what we’ve seen emerge is sort of a small group of people who have been voted in or who have the largest amount of tokens that can vote. And it makes things just a little bit easier when it’s a smaller group making the decisions, but I think we see different nuances when it comes to different protocols and what it means to be someone in a position to make those decisions.“
• “It’s a little easier to replace someone in the protocol where the organization is flatter and it’s harder to replace people in positions of power in a centralized company, and that can lead to a bad culture, a decline in revenue, things like that. So, definitely excited about different models for decentralized governance.“
• “I believe that you as a user can decide from public forums whether I want to participate in this and become a voting member of this protocol. As an investor, you can make a decision based on things that have been proposed and how the voting has gone. Do I want to invest in this protocol? Does that make sense?“
• “I think there’s a different level of governance needed for a DAO like “Friends With Benefits” versus a venture DAO where you have to make decisions quickly and work very closely with the investments you make, and I think they require a different threshold for governance.“
• “I think the most common standards I’ve seen emerge are very general. I’ve seen many projects either essentially weighted by effort, considering your vote, or voting members with specific skills in those voting positions. But beyond that, I think we’ve seen a lot of experimentation, but nothing that’s taken off, I guess, and been used across a lot of protocols.“

Despite the current economic climate, crypto investment firm Pantera Capital CEO and Co-CIO Dan Morehead believes blockchain development will continue unabated.

The VC is confident in the long-term potential of blockchain technology, even if the market may not feel that way at the moment, and according to a report by Cointelegraph, during an interview on September 23, he told Real Vision:

“Like all disruptive things, like Apple or Amazon stocks, there are short periods where it is correlated with the S&P 500 or whatever risk metric you want to use. But over the last 20 years it has done its own thing. And that’s what I think will happen with blockchain over the next ten years or whatever, it’s going to do its own thing based on its own fundamentals.“

“We have been very focused on DeFi in recent years, it is building a parallel financial system. Gaming is coming online now and we have a few hundred million people using blockchain. There are a lot of really cool game projects and there are still a lot of opportunities in the scalability sector.“

Despite the downward trend in venture capital, many people believe that it will pick up again in the future. Cointelegraph Research’s data says August inflows fell by 31.3% compared to July (which saw inflows totaling $1.98 billion).

Sandeep Nailwal, managing partner at Symbolic Capital, told Cointelegraph:

“Everyone expected M&A to take off in crypto when we entered this bear market, but we haven’t seen it happen yet. I think the main reason for this is that the downturn hit the industry so quickly and so intensely that even large companies that were about to be aggressive acquirers were so shocked by the crash that they had to make sure their own balance sheets were in order before they saw others places for growth.“