• 23 July, 2024
News

Axo’s Expert Advice on Navigating Cardano’s Governance Woes

Cardano’s transition into the age of Voltaire, the age of community governance, has become a critical development period for the blockchain’s future.

According to Axo, a DeFi platform, governance is about solving the principal-agent problem that arises when stakeholders nominate someone to represent them, but they are unsure if the agent will act in the stakeholder’s best interests or their own. 

Aligning incentives is key to addressing the problem, but it also raises concerns about gaming metrics. Governance implicitly relies on a degree of trust, which is difficult to stomach for an industry aspiring to be trustless.

Axo suggests limiting damage by designing the system so that the network can push out bad agents, self-heal, and continue. Defining the remit is another way stakeholders can control their representatives by only giving them freedom of action within a predefined space. 

Neutered power is an issue that arises with limiting power, and it means that no action requiring immediate and effective power can be addressed with a slow and methodical approach.

Axo also highlights that governance is a spectrum, and every system benefits from some degree of centralization or decentralization in key areas. For Cardano to succeed in governance, it must identify and address these points to create a DeFi space that is fair and efficient for everyone.

In a related development, according to data from DeFi Llama, the ADA-denominated value of cryptocurrency locked within the Cardano blockchain has reached an all-time high of 341 million ADA, indicating growing adoption of the platform.

This is a significant boost to the ecosystem, and the launch of the Djed over-collateralized algorithmic stablecoin has opened up new yield farming possibilities in the Cardano DeFi ecosystem.

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