Andre Cronje Quits DeFi

The biggest crypto news and ideas of the day

Mar. 7, 2022

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Welcome to The Node.

In today's newsletter: Andre Cronje is quitting DeFi. Binance launches fiat-to-crypto payment gateway. And NFT-scaling platform Immutable raised $200 million.

Questions? Feedback? We'd love to hear from you – simply reply to this email.

–Daniel Kuhn

Today's must-reads

Top Shelf

ANDRE THE GIANT: Prolific developer Andre Cronje and longtime collaborator Anton Nell are calling it quits and "closing the chapter" on developing decentralized finance (DeFi). Dozens of tokens have tumbled following the news, but many have noted that his exit will not impact the operations of many of the protocols in which he was involved. Cronje's protocols have driven billions in value – including Yearn Finance, the project known for kick-starting DeFi's breakout in summer 2020 that Cronje has threatened to leave more than once. The decision appears to be concrete.

CRYPTO READY: Binance, the largest cryptocurrency exchange, set up its own fiat-to-crypto payments provider, Bifinity, to help businesses become "crypto-ready." Bifinity will support 50 cryptocurrencies and all major payment methods including Visa and Mastercard. Merchants will also be able to use Bifinity's APIs to "get their business crypto-ready," enabling them to accept payments in crypto. Binance said it has fully reopened euro and sterling transactions over the Single Euro Payments Area (Sepa) and U.K.'s Faster Payments Service networks.

GLOBAL EXPANSION: NFT-scaling platform Immutable has raised $200 million in a Series C funding round that was led by Singapore state investment fund Temasek at a $2.5 billion valuation. The funds will be used for global expansion, among the initiatives Immutable plans to add 200 employees in the next 12 months, which would more than double its current 165-person team.

SUN SETTING: Tron founder Justin Sun has been a prominent supporter of crypto fundraisers for Ukraine during Russia's invasion, even donating $200,000 in Tron's token TRX and requesting a Tron address be added to the official list of digital wallets. But his political views may be more muddled, CoinDesk's Sandali Handagama reports. After Tron users were kept off an airdrop list by the Ukrainian government (which never happened, incidentally), Sun took to Chinese social media to disparage NATO, the West and say he hopes to "strengthen cooperation" with Russia.

–Fran Velasquez

Overheard on CoinDesk TV...

Sound Bites

"From our perspective, we're trying to remain calm, following the regulatory guidance and doing what we should in terms of intelligence."

–OSOM CEO Anton Altement, on resisting calls to block all Russian users from his crypto investment app, on CoinDesk TV's "First Mover."

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What others are writing...

Off-Chain Signals

Coinbase Blocks Over 25,000 Addresses Linked to Illicit Russian Activity (Decrypt)
Crypto exchange FTX announces push into Europe (The Block)
DeFi wallet Argent launches layer 2 account with waitlist over 500,000 (The Block)
Axie Infinity Hikes Marketplace Fees to Reward Game Players with 'Creator Codes' (The Defiant)
How Swapping and Staking on Curve Drives High User Engagement (The Defiant)
Stanford Cryptography Researchers are Building Espresso, a Privacy-Focused Blockchain (TechCrunch)
Crypto Startup Argent Wants to Put an End to Gas Fees with Layer 2 Wallet (TechCrunch)

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Putting the news into perspective

The Takeaway

ENS and the Limitations of DAO Governance

Brantly Millegan has mostly avoided accountability. What does that say about decentralized voting systems?

Last month, Twitter sleuths uncovered a cache of homophobic and transphobic posts from Brantly Millegan, director of the Ethereum Name Service Foundation (ENS), roiling the crypto community.

"Homosexual acts are evil. Transgenderism doesn't exist. Abortion is murder. Contraception is perversion. So is masturbation and porn," read one of Millegan's tweets from May 2016.

Responding to backlash, Millegan doubled down, chalking up the perspective to his Catholic faith. "Nice to see some ppl finally read the first word of my bio," he wrote (his Twitter bio says "Catholic, husband, father").

It was enough to get him fired from his position as director of operations at True Names Limited, the Singapore-based nonprofit that organizes and funds the Ethereum Name Service. After two days of deliberation, Nick Johnson, Millegan's boss at True Names and the founder of ENS, said he felt Millegan's position was "no longer tenable."

The catch is that while Millegan had been removed from True Names Limited, he wasn't really gone from the organization as a whole – and in a vote that ended this past weekend, the community confirmed that Millegan will stay on as director of the ENS Foundation and remain a core developer on the project.

That's because, somewhat confusingly, "ENS" refers to a multi-part organizational structure, as opposed to a single company.

ENS is a program on the Ethereum network, a system for turning long, numerical Ethereum addresses into text-based shortcuts. It functions like a top-level domain on the internet we're already used to. In the way that the ".com" suffix shortens an otherwise unwieldy IP address into something handy and readable (e.g. "google.com" instead of "142.250.65.238"), the ".eth" suffix gives traders a quick way to identify a specific address on the Ethereum network.

The ENS Foundation is a company incorporated in the Cayman Islands, the legal entity behind ENS. It's governed by the ENS DAO (decentralized autonomous organization), which is essentially a crypto-backed voting service on the blockchain. It uses a home-brewed cryptocurrency, ENS, to assign proportionate voting power (one token is one vote).

When a DAO member puts forth a proposal, it's up to other members to use their ENS to either vote for it or against it. There's also a delegate system, through which token holders can choose a representative to control their votes for them.

ENS distributed ENS tokens to anyone who'd used the service on or before Oct. 31, 2021. To those who didn't care about participating in DAO votes, it felt like free money, since the tokens are also worth something on decentralized exchanges. (Disclosure, I claimed some ENS tokens last fall and cashed out immediately.)

Because True Names Limited operates as a conventional company and isn't beholden to a decentralized governance structure, it was able to fire Millegan shortly after the offending tweets were unearthed.

Removing Millegan from the ENS Foundation, however, had to be put to a DAO vote.

That vote was active for the past seven days on a crypto voting platform called Snapshot. Yesterday, it officially failed to pass, with 1.6 million ENS tokens voting "against" Millegan's removal, and 1.4 million tokens assigned to the "for" position. Around 19% of the total votes cast (698,000 tokens) were abstentions.

While the decision not to remove Millegan from the ENS Foundation seems democratic, it's important to remember how exactly voting power was initially distributed this past fall. Thanks to the inequitable distribution and delegation of tokens, Millegan has always had outsize power over this ecosystem. This is what distinguishes the DAO governance model from the co-op model, wherein each community member gets one vote no matter their position in the hierarchy.

A quarter of the total ENS supply went to early adopters (everyday users like me, who procured an ENS domain name before November), and 50% went to the DAO treasury, for community members to control via votes. As a way to reward participation in the project (a la equity in a conventional startup), the final 25% went to ENS contributors and developers.

Not coincidentally, Millegan himself holds a massive amount of ENS tokens, and used them to vote against the proposal. He's also been delegated votes by other ENS holders: He holds around 1,600 tokens in his public wallet, but he's also controlling the combined voting power of everyone who delegated their votes to him when they claimed their ENS tokens. With some 363,000 votes under his charge, he was able to sway the results in his favor.

Without those votes, the proposal would have passed.

Read the full article here.

–Will Gottsegen